This article discusses the housing outlook for 2007
2007 has commenced with a lot of mixed signals. Some research reports suggest that pricing declines will continue, others believe that the worse maybe over for the homebuilders. The truth lies somewhere between the fine print!
We believe that the housing market will be in ‘pause’ mode until Spring sets in. The economy has posted some impressive numbers, and we believe, some key factors that drive the housing market may be turning positive:
1. The economy has posted good numbers. Inflation is tame and the likelihood of a rate hike by the Federal Reserve looks low. These augur well for mortgage interest rates. Unemployment rate is low - salary and employment levels in markets ultimately dictate the health of that market, and a robust economy will prevent a severe downturn in the housing market.
2. A lot of the bad news from the homebuilders is now behind them. The pricing increases of the last few years saw homebuilders overinvesting, and as the housing markets have cooled over the latter half of 2006, the homebuilders have cleaned up their act. Although the number of unsold houses, and days on the market numbers look ominous, overall inventory on the market should decline leading to a reduction in ‘overhang’ in the housing market.
3. Most overheated markets will exhibit some year over year declines, but these declines will not eliminate the gains in equity for homeowners who bought their homes before mid 2005.
4. It will be a buyers market. If you can buy a home without a fancy mortgage such an Option ARM or a mortgage with an interest only option, this may be a good time to get a great deal on a home.
Ultimately, don’t believe the hype. Stick to the tip we posted in the first blog: Are you buying the home on the inherent economics underlying the purchase (monthly mortgage payments, price of home) vs. affording a home based on your ability to qualify for a mortgage ? Are you willing to live in the home for the next 3-5 years ? If ‘Yes’, you should do okay with the purchase of a home…